Meaning of Authorised Economic Operator (AEO)
An AEO is an economic operator who, by satisfying certain criteria, is considered to be reliable in their customs related operations throughout the European Community and is therefore entitled to certain benefits listed below.
Depending on the type of AEO certificate applied for and granted, these can include either easier access to certain customs simplifications or certain facilitations from customs security and safety controls, or both.
Purpose of introducing AEOs
The introduction of AEO status is the EC’s response to the need to secure international supply chains and the introduction of Customs-Trade Partnership Against Terrorism (C-TPAT) in the USA and the development of the Safe framework of standards in the World Customs Organisation.
The aim is to provide business with an internationally recognised quality mark which will indicate that their role in the international supply chain is secure and their customs controls and procedures are efficient and compliant. An operator with AEO security and safety status implies that apart from being reliable in the traditional financial and customs terms, they are also compliant in respect of security and safety standards and can therefore be considered as a ‘secure’ trader and thus a reliable trading partner.
What is the ‘International Supply Chain’?
The international supply chain, from a customs perspective, starts from the process of manufacturing goods destined for export, from a customs territory, through to delivery of the goods to the party to whom the goods are actually consigned in another customs territory.
From an AEO/EC viewpoint, any of the following would be considered as being part of the international supply chain:
- goods imported from a third country (for example, USA, China, Russia etc) into the EC
- goods imported into the EC and declared to a customs procedure such as inward processing or customs warehousing, processed and/or stored and then re-exported from the EC
- goods imported into the EC for storage or processing and then delivered onto the EC market
- goods manufactured in the EC from free circulation goods and subsequently exported from the EC.
Types of AEO certificate
There are three types of certificate:
- Security and safety – issued to any business that fulfils the criteria of customs compliance, appropriate record keeping standards, financial solvency, and maintains appropriate security and safety standards.
- Customs simplifications – issued to any business that fulfils the criteria of customs compliance, appropriate record keeping standards and financial solvency.
- Customs simplifications/security and safety – issued to any business that fulfils the criteria of customs compliance, appropriate record keeping standards, financial solvency, and maintains appropriate security and safety standards and wants to receive the benefits of both types of AEO.
Who is eligible to apply for AEO status?
Anyone involved in the international supply chain that carries out customs related activities in the EC can apply for AEO status irrespective of the size of their business. This includes logistics operators, carriers, freight forwarders and customs agents.
You may apply if you fall into one or more than one of the following categories:
- Manufacturers – ensures a safe and secure manufacturing process for their products and supply of those products to their clients.
- Exporters – the person on whose behalf the export declaration is made and who is the owner of the goods or has similar right of disposal over them at the time the declaration is accepted. For persons established outside the Community, the exporter shall be considered to be the contracting party established in the Community.
- Freight forwarders – organising the transport of goods on behalf of an exporter, importer or other party.
- Warehousekeepers – a person authorised to operate a customs warehouse.
- Customs agents – a customs representative acting on behalf of a person who is involved in customs related business activities (direct representative) or in his own name (indirect representative).
- Carriers – person who actually transports the goods or is in charge of or responsible for the operation of the means of transport.
- Importers – an operator on whose behalf an import declaration is made and who at the time the declaration was accepted is the owner/consignee of non-community goods or if not the owner is responsible for the control of the goods.
This list is not exhaustive. Others who may qualify include port operators, stevedores, loaders, and secure freight parking operatives.
Businesses that are not involved in customs related activities will not be entitled to apply. This means any of the following categories will not normally be eligible to apply for AEO status:
- Insurance companies
- Software houses
and any other similar trade categories who are not generally involved in the international supply chain unless they are, or acting in the name of, an importer or exporter.
Similarly, any businesses that are only involved in internal trade within the EC will not be entitled to apply. This would include a manufacturer who only supplies goods to EC customers and the carrier who only transports those goods.
Bureaus and buying and selling agents will not normally qualify for AEO status unless they also act as customs agents for their clients.
What are the benefits of a security and safety AEO certificate?
If you hold AEO status for security and safety purposes it will enable you to benefit from certain facilitations of customs controls at the entry of the goods into the customs territory of the Community or when your goods leave the customs territory of the Community. These will include:
- a lower risk score which will be incorporated into customs’ risk management systems and be used to determine the frequency of customs physical and documentary checks
- consignments may be fast tracked through customs controls. Holding an AEO security and safety certificate does not mean that your consignments will not be subject to examination for prohibited or restricted goods or on behalf of other government agencies. However if it is selected for examination it will receive priority over non-AEOs
- when the requirement to make pre-arrival/pre-departure summary declarations is introduced in July 2009 AEOs will be able to omit certain data elements from the declaration
- recognised status across the EC
- an industry ‘kite mark’ and useful marketing tool
- potential for future reciprocal arrangements and mutual recognition with countries outside the EC, for example, USA or trading partners that adopt the WCO Safe framework.
What are the benefits of a customs simplification AEO certificate?
There are a number of customs simplified procedures in place such as:
- The Local clearance procedure under Customs Freight Simplified Procedures (CFSP) and the National Export System (NES)
- Simplified declaration procedure under CFSP and NES
- Simplifications for regular shipping services.
You do not need to be an AEO certificate holder to apply for these simplifications. However, if you hold a customs simplification AEO certificate, it will speed up the process of authorisation when you apply for these procedures as we will not need to re-examine any criteria that have already been met when you applied for AEO.
The AEO customs simplification certificate will also be:
- a recognised status across the EC that should make it easier for businesses to apply and use simplifications across the EC
- an industry ‘kite mark’ and useful marketing tool
When the Modernised Customs Code is agreed and implemented, possibly in 2010, a number of additional measures will require the same criteria as a customs simplification AEO certificate. These are likely to include:
- guarantee waivers
- centralised clearance where more than one Member State is involved
- accreditation of agents who wish to operate in more than one Member State
- the ability to apply for a single community authorisation to use simplified declaration procedures across the EC
- the ability to apply for a special procedures authorisation involving more than one Member State
- self assessment.
If a combined customs simplification and security and safety certificate is held, it entitles the holder to the all the benefits of both categories listed above.
Please contact RKG Consulting if you wish to apply for AEO status.